2020 Q3 Standard Chartered Hong Kong SME Leading Business Index: Overall Index Slightly Increases to 29.8 SMEs to Sketch Game Plans through Market Exploration

(Hong Kong, 27 August 2020) The Hong Kong Productivity Council (HKPC) today announced the “Standard Chartered Hong Kong SME Leading Business Index” (“Standard Chartered SME Index”) for the third quarter of 2020, which recorded a mild increase to 29.8 as compared to the previous quarter. All the five component sub-indices* also slightly went up - among which the “Investment Sentiment” and the “Recruitment Sentiment” contributed to most of the rise. However, the overall index and sub-indices were still at low level, reflecting that SMEs are facing tremendous challenges under the prevailing COVID-19 epidemic.   

For the 3 key-industry index, namely Manufacturing, Import/Export Trade & Wholesale, Retail, all rose marginally as compared to Q2. The “Investment Sentiment” sub-index of Manufacturing Industry surged from 31.7 to 43.1, marking a relatively significant uptake, yet remained at a low level. Besides, the feature topic of this survey dived deep into SMEs’ development blueprint amid the uncertain global economy. About 39% of surveyed SMEs indicated that they will sketch their game plans by focusing on current market or exploring new market in the coming 12 months. For SMEs hoping to expand into new market, their most desired choices are ranked as Mainland China, ASEAN and European.

Mr Edmond Lai, Chief Digital Officer of HKPC, said, “Despite the timid increase in Q3’s overall index, it still remains at a low level. It is believed that the persistent global and local COVID-19 epidemic, as well as Hong Kong becoming the focal point in the recent China-US trade conflict, will cast thorny shadow over SMEs’ business environment in future. HKPC, as a trustworthy partner to local SMEs, has never stopped from providing technology and other support services to SMEs amid the epidemic, joining hands with them to tide over the difficulties through transformation. Be it the remote working tips, ‘HKPC Live’ webinars that continuously keep SMEs abreast of various information, or the large-scale ‘Fund Fair Everywhere 2020’ online exhibition organised by the SME ReachOut – a dedicated service team that introduces and matches Government funding schemes for SMEs, all serve to help SMEs explore resources to counter the difficult times”.

The survey also unveiled that 69% of surveyed SMEs expected a decrease in turnover in Q3. Among those indicated a change on investment categories, 77% and 76% respondents said they will relatively increase or remain investment in R&D projects (e.g. product development/improving productivity) and information technology system respectively, while 46% and 40% of them tended to reduce investment in inventory (including raw materials or products) and office/factory/shop in Q3. 
               
“Even when Hong Kong SMEs are facing unprecedented hardship in business operations, 39% of the surveyed SMEs will react by focusing on current market or exploring new market, and that quite a lot of SMEs expressed to remain or increase investment in R&D projects and information technology system. It reflected that SMEs are seeking multipronged ways to maintain their operations so that they can set off again once the epidemic situation becomes stable. The survey also recorded a significant growth in the “Investment Sentiment” sub-index of Manufacturing Industry, which will undoubtedly boost confidence of enterprises to achieve Hong Kong reindustrialisation. In fact, the trend of re-emergence of local production has been well-noted since the epidemic outbreak. Being the pioneer in Industry 4.0 and Enterprise 4.0, HKPC is committed to providing extensive trainings, consultation and technical support solutions to the industries, by integrating the use of advanced manufacturing technology with its knowledge and experience, in promoting smart production and smart enterprise accumulated in recent years, also helping Hong Kong companies realise reindustrialisation in Hong Kong. For SMEs eyeing Mainland China and ASEAN markets, we provide them with four major services in order to tap into the new market. They include plant layout design and productivity enhancement, information on the relevant environmental regulations for installation of environmentally friendly equipment in compliance with laws, technical support, and product testing.” Mr Lai added.
Mr Kelvin Lau, Senior Economist, Greater China, Global Research, Standard Chartered Bank (Hong Kong) Limited, said, “Despite the modest improvement from Q2, our latest overall index stayed below 30 for a second straight quarter, indicating still evident contractionary pressure on a broad range of economic activity. Expectations towards sales, profit margin and the global economic outlook remain particularly grim, indicating no quick improvement in sight. Externally, persistent recessionary forces continue to weigh on the global demand outlook, while US-China tensions look to remain high at least running up to the US elections in November, in our view”.

“Domestically, the resurgence in COVID-19 new cases and the resulting re-tightening of social distancing measures mean no relief in sight for our retail sector respondents either, making them once again the most pessimistic industry sub-index this time. ‘Information and Communications’ and ‘Financing and Insurance’ are the relative outperformers; that said, neither of these industry sub-indices managed to climb back above 40, with the IT sector getting even more pessimistic on the global economic outlook, and the financial sector indicating less appetite to hire. All these echo our view that Hong Kong SMEs are still facing intense challenges and the economy is likely to remain in deep year on year contraction territory in Q3, albeit not as bad as H1 only because of the more favourable base effect,” Mr Lau added.    

Conducted in mid July 2020, the survey successfully interviewed 814 local SMEs. The “Standard Chartered SME Index” report will be available at HKPC website: https://u.hkpc.org/scbi-en soon.

*The five component sub-indices are "Recruitment Sentiment", "Investment Sentiment", "Business Condition", "Profit Margin" and "Global Economy".

- Ends -

Mr Edmond Lai, Chief Digital Officer of HKPC (Left); and Mr Kelvin Lau, Senior Economist, Greater China, Standard Chartered Bank (Hong Kong) Limited (Right), announced the overall Index recorded a mild increase to 29.8 as compared to the previous quarter at the press conference of “Standard Chartered Hong Kong SME Leading Business Index 2020 Q3”, but the overall index and sub-indices were still at low level, reflecting that SMEs are facing tremendous challenges under the prevailing COVID-19 epidemic.